interest charges or dividend payments. To go beyond this would be to enter the domain of speculation. There may be cases in which it is wise, even in the interest of investors, to draw securities against future expectations, but, speaking generally and from the public point of view, it is better that a corporation whose solvency depends upon the use of speculative securities should acknowledge at once the necessity of reorganization rather than that the fund of the country's assured credits should be diluted by injecting into it paper of a speculative character. This assumption must approve itself to every observer of business conditions who appreciates the importance of a stable fund of business credits, and if Congress believes it within the sphere of the Government to take official notice of the distress and suffering incidental to commercial crises and business depressions, it can not proceed far along such a line of thought without being forced to recognize that the amount and character of corporate securities is an important element in the situation.

The direct interest of the Commission in the matter, however, arises from the fact that Congress has made this body a tribunal, when complaint is made, for inquiring into the reasonableness of railway rates. It has frequently been urged that capitalization exercises no influence upon rates, but such an assertion is at best a partial truth. When one holds in mind how persistently the courts oppose the enforced approach of railway tariffs to the line of confiscation; when one comes to realize how eager the carriers are to restore to their property accounts the value of the improvements of past years paid for out of revenues; when one clearly understands that so long as railways which operate on different levels of cost continue to compete for the same traffic, there must result a permanent differential profit to the more fortunate road; and, finally, when one reflects upon the fact that securities once issued are ordinarily beyond recall and beyond control, it is difficult to see how one can assert that the kind and amount of securities issued by a public service industry have no bearing on the problem of railway tariffs as that problem must be regarded by the Commission and by the courts. It is in fact the setting in which the problem is most frequently submitted for judicial consideration.

GENERAL REGULATIONS RELATING TO MOVEMENT OF TRAFFIC.

The beneficial effects of the act of May 30, 1908, which directed the Commission to formulate regulations for the transportation of explosives and to revise and amend the same as occasion might require, are shown by the fact that no accident has since occurred in the transportation of these dangerous articles when carried in the manner required under the rules prescribed by the Commission. As the result of experience and observation, it is clear that the Commission ought to have authority, after due investigation, to make general orders relating to the conditions under which traffic is transported, but not affecting the physical operations of the carrier. The exercise of such authority under appropriate delegation of power as, for example, in the matter of demurrage and car-service rules, about which something is said in a later part of this report, would, as we believe, be in the public interest. Uniformity in such rules, regulations, and practices is highly desirable if accompanied by sufficient flexibility to meet special local conditions.

A single illustration will suffice. Carriers not infrequently publish carload rates with minimum, weights applicable to cars of different dimensions. A shipper orders a car of a certain size for a shipment that can be loaded in a car of that size. For its own convenience the carrier furnishes a larger car, for which the tariffs provide a higher minimum weight. Having no tariff rule to meet such conditions, the carrier under the law is required to assess its charges on the basis of the car actually furnished and used. Such a case was fully investigated by the Commission upon formal complaint and an order entered requiring the carrier to make reparation, as in fact it had desired to but could not lawfully do, in the absence of tariff authority, without an order by the Commission; and also requiring it to publish a rule in its tariff providing that when a small car is ordered and a larger one furnished for its own convenience the charges shall be based on the terms of the tariff applicable to the car ordered. This case has been followed by numerous formal cases of the same kind, and under the law as it now stands affirmative action in every such individual case is required before the shipper can lawfully have relief not specifically authorized by tariff. The power, after due investigation, whether upon complaint or on the initiative of the Commission, to make general orders relating to the rules, regulations, and practices of carriers of this general character, which shall have the force and effect of general rules of transportation, whether incorporated in the tariffs of carriers or not, would manifestly relieve the Commission of the labor of dealing with numerous complaints involving the same principle and the same state of facts and would work to the general advantage.

RATE SCHEDULES AND APPLICATION OF RATES.

The policy and the effort outlined in our last annual report have been continued during the year, and substantial progress has been made. Minor modifications or additions to the regulations governing the publishing, posting, and filing of tariffs have been made in the light of further experience, but no important change in principle has been found necessary or advisable. The importance of a clear statement of rates and proper publicity of the same is forcefully stated in United States v. Illinois Terminal Railway Company, 168 Fed. Rep., 546, in which it is said:

The chief object of the act to regulate commerce is the prevention of discrimination. Carriers, being engaged in a public employment, must serve all members of the public on equal terms. This was the doctrine of the common law. It has been explicitly stated and strengthened by the successive acts to regulate commerce. The requirement of the act that all rates should be published is perhaps the chief feature of the scheme provided for the effective outlawing of all discriminations. If this portion of the act is not strictly enforced, the entire basis of effective regulation will be lost. Secret rates

will inevitably become discriminating rates. Whenever discriminating rates or practices are made public, a thousand forces of self-interest and of public policy will be set at work to reduce them to fairness and equality.

In the twelve months ended November 30, 1909, 184,303 tariff publications containing changes in rates and rules governing transportation were filed with the Commission, though the number of tariffs actually in effect on November 30, 1909, was materially less than on November 30, 1908. Many of the filings of the year ended November 30, 1909, were cancellations of old issues. A check of the records of a few roads in different sections of the country, some of which have made good progress in tariff reconstruction and some of which have made less progress, shows that on an average the number of effective tariffs of those roads has been reduced within the year ended November 30, 1909, about 27 per cent. The decrease in the number of tariffs filed is attributable in part to the consolidation of tariffs into joint agency publications which are filed by joint agents on behalf of a large number of carriers, duplication and multiplication of filings being thus avoided. However, the smaller number of filings does not necessarily mean that fewer changes in rates are being made. For substantial failure to comply with tariff regulations, or for failure to give lawful notice of changes, 9,581 tariff publications have during the year been rejected when tendered for filing.

Testimony as to important and material benefits from improved tariffs comes from many sources. For example, a freight traffic manager of one of the largest and most important railroad systems of the country writes as follows:

It will probably require the carriers, especially the larger ones, several months more to complete the consolidation and reissue of old tariffs to conform to the Commission's rules, but with our line the work has sufficiently progressed to furnish some idea of the benefits accruing, in that the number of overcharge claims shows a decrease. As you are aware, the claims presented to delivering carrier for overcharges are usually the result of errors upon part of its connections, and mention of this is merely to emphasize the statement that will follow as reflecting improvement in tariff conditions and better work upon part of forwarding agents of initial lines.

He then shows that, based upon the experiences of the first half of the year 1909, the number of overcharge claims filed against his lines for 1909 will be about 25 per cent less than in 1907, and that the number of loss and damage claims for the first half of 1909 were 34 per cent less than for the first half of 1908, and says:

The improvement in the tariffs has been an important factor in this showing, in that interruptions to the movements due to delayed billing have been greatly reduced, and the losses and damage due to separation of the traffic from the waybills have about reached the minimum. Aside from the economy revealed by these figures, the improvement in the service is made patent and confirms the prediction that whilst the expense of the carriers incident to tariff reissue

in compliance with Interstate Commerce Commission rules and regulations is quite heavy, nevertheless, even at this early date the advantages accruing in economy and better service seem to fully justify the expenditure.

The traffic director of a firm in the Middle West which does a very large business and ships an enormous tonnage writes as follows:

In going over our claim records we note a very great decrease in the overcharge claims, which seems coincident with the efforts of the Commission to simplify the form and to regulate the issue of freight tariffs.

He then says that the claims suspense account of his firm has in former years reached $100,000 per annum, and for 1909 will probably not exceed $7,500, while the number of such overcharge claims has been reduced from 1,008 in the year 1905 to 205 for the first nine months of the year 1909, and adds:

* * *

We feel sure that the improvement results from improved waybilling on the railroads, traceable to tariffs which can be understood more clearly by agents and waybilling clerks. The effect of your tariff work has been so marked in the reduction of our claim annoyances that we feel it but just to express our appreciation.

Many requests have been received for special permission to make tariff publications effective on less than statutory notice. About 80 per cent of those received were granted. About 60 per cent of those granted were for the purpose of permitting corrections of clerical or typographical errors in tariffs, and many were for the establishment of rates in the first instance to new stations on old lines or to stations on newly constructed lines. The others presented such emergencies as, in the judgment of the Commission, justified granting the permission.

The requirement for thirty days' notice of changes in rates is regarded by the Commission as a wise and healthy one, and it is not the policy or intent of the Commission to exercise the authority conferred upon it to grant exceptions to that requirement except under circumstances which fully justify such action and which do not involve probable discriminations or resultant rate disturbances. As improvement in tariffs progresses it is believed that the authority for establishing rates on less than statutory notice will be justified in a smaller number and a smaller percentage of cases.

The order issued by the Commission on June 2, 1908, modifying the requirements of section 6 of the act in the matter of posting tariffs at stations has, very generally at least, been complied with. The Supreme Court has said, in substance, that this act contemplates that tariffs shall be posted for public inspection and that the obligation is upon the shipper to advise himself as to the rate and to pay the lawful rate regardless of any misquotation of same made by the carrier's agent. The Commission has said in Interstate Remedy Company v. American Express Company, 16 I. C. C. Rep., 436:

While it has been repeatedly emphasized by the Commission that the shipper is put upon notice of the rate by the publication of the tariff, it has not been held that a shipper must determine for himself the lawfulness of a rate, regulation, or practice, upon his peril. The responsibility rests upon the carrier to have lawful rates and rules in effect, and every shipper may with safety rely upon such rates without fear that they will be withdrawn as illegal after he has made shipment thereon, resting in the confidence that they are lawful so long as they are in force. If subsequently found to be unlawful, the carrier is subject to penalty for the institution and maintenance of such rates or rules, but the law does not contemplate that the shipper shall move upon any other theory than that the provisions of the carrier's tariff are in full compliance with the law's demands.

In the case of Texas & Pacific Railway Company v. Cisco Oil Mill, 204 U. S., 449, the Supreme Court decided that where a rate schedule was published and properly filed with the Commission failure of an agent to post copy of it at a particular station did not invalidate the schedule, and said:

Whether by the failure to post an established schedule a carrier became subject to penalties provided in the act to regulate commerce, or whether if damage had been occasioned to a shipper by such omission, a right to recover on that ground alone would have obtained, we are not called upon in this case to decide.

The criticism has been freely indulged in that carriers' tariffs are not in such form that the average person can readily and with a reasonable degree of certainty determine the lawful rates therefrom. That criticism was fully warranted by the former condition of tariffs and, to a large extent, is still warranted, but, as has been seen, the condition has greatly improved and is continually improving; and in that connection it should be remembered that the public has not had much experience in an effort to become acquainted with the carriers' tariffs, because it is only within a comparatively recent period that the tariff has been anything like a reliable guide to the charges which the shipper is required to pay.

UNIFORM DEMURRAGE RULES.

It seems appropriate to refer in this report to the adoption of a uniform code of car demurrage rules by the National Association of Railway Commissioners. As its name indicates, this association comprises the membership of all the railroad commissions of the United States, meeting in annual convention for the purpose of considering common problems. At the 1908 session the committee on car distribution and car shortage submitted a report which reviewed the severe car shortage of the previous fall and pointed out that the breakdown of the country's transportation system at that time was chargeable in no small degree to the undue holding of cars by shippers and receivers of freight. As a step toward the improvement of existing conditions, it was recommended that a committee be ap